Asymmetric loss utility: an analysis of decision under risk
This paper develops a utility model for evaluating lotteries. In estimating utility, risk averse people use an asymmetric loss function. Expected utility is seen as a special case that is a good approximation in some cases. The model resolves several paradoxes and makes easily falsifiable predictions. When used in hypothesis testing, the model allows researchers to directly specify their attitudes toward risk.
|Date of creation:||29 Jan 2004|
|Date of revision:|
|Note:||Type of Document - pdf / TeX; prepared on Win; pages: 21; figures: 3|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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- Kahneman, Daniel & Tversky, Amos, 1979.
"Prospect Theory: An Analysis of Decision under Risk,"
Econometric Society, vol. 47(2), pages 263-91, March.
- Amos Tversky & Daniel Kahneman, 1979. "Prospect Theory: An Analysis of Decision under Risk," Levine's Working Paper Archive 7656, David K. Levine.
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